Montenegro Issues a Draft QDMTT Law to apply from January 1, 2026

On November 26, 2025, Montenegro issued a Draft Law to apply a domestic minimum top-up tax (DMTT) from January 1, 2026.

The Income Inclusion Rule (IIR) and Under-Taxed Profits Rule (UTPR) are not being implemented in Montenegro.

General

The Draft Law provides for the substantive provisions for the application of the DMTT in Montenegro, based on the Model GloBE rules and the specific drafting in the EU Minimum Tax Directive.

Article 34 of the Draft Law provides that the Ministry will adopt detailed regulations for the implementation of the Law within one year from the date of its entry into force.

It also provides that the tax authority of Montenegro will, in accordance with its domestic legislation, apply the DMTT in accordance with any agreed OECD Administrative Guidance.

The approach taken is essentially to reproduce the GloBE Rules as provided in the EU Minimum Tax Directive, and then to adjust and amend to tailor the DMTT to Montenegro’s tax regime. In addition, some aspects of the GloBE Rules are not relevant as Montenegro is not implementing an IIR or UTPR.

Safe Harbours, as reflected in the OECD Safe Harbour Guidance and the Second Set of OECD Administrative Guidance are also reflected in the legislation via a transposition Article.

Administrative Guidance

There are no aspects of the OECD Administrative Guidance specifically included in the Draft Law. Article 34 of the Draft Law does provide that the DMTT will be applied in accordance with any agreed OECD Administrative Guidance and therefore it is likely that this will be applied in Montenegro.

Elections in the OECD Model Rules

A number of the elections included in the OECD Model Rules are provided in the Draft Law, including:

-Excluded Entity Election (Article 2(4));

-Election to use the Realization Method (Article 7(8));

-Consolidation Election (Article 7(14));

-Unclaimed Accrual Election (Article 13(1)(2));

-GloBE Loss Election (Article 14);

-Prior Year Adjustment Election (Article 15(4));

-De minimis Election (Article 20);

-Substance-Based Income Exclusion Election (Article 18(2));

-Tax transparency Election (Article 27); and

-Safe Harbour Elections (Article 22).

The following are not included:

-Stock-Based Compensation Election

-Election to Spread Capital Gains

-Deemed Disposal of Assets Election

-Taxable distribution Election

-Distribution Tax Regime Election

Other aspects of the OECD Model Rules that are not included are:

-Article 6.4. (application to Joint Ventures and JV Subsidiaries);

-Article 6.5 (application to Multi-Parented MNE Groups);

-Article 9.3 (Initial Phase of International Activity Exemption)

QDMTT Design Features

Article 5(2) of the Draft Law provides that the obligation to pay the DMTT for a given fiscal year shall be borne by the UPE of an MNE or large domestic group located in Montenegro, and all of their constituent entities located in Montenegro if their effective tax rate is less than 15%.

The method of calculating the DMTT is generally based on the OECD Model Rules.

The Top-up Tax that is subject to the DMTT is based on the whole amount of the Jurisdictional Top-up Tax irrespective of the Ownership Interests held in the Constituent Entities located in Montenegro by any Parent Entity of the MNE Group (unlike the general GloBE Rules).

Stateless Entities

Under the OECD Administrative Guidance, a domestic minimum tax does not need to apply to Stateless Constituent Entities or permanent establishments to be a QDMTT. However, jurisdictions can impose a QDMTT on these entities when they are created under the domestic law of the jurisdiction (or where a permanent establishment has a place of business in the QDMTT jurisdiction).

The Draft Law does not apply any specific provisions for Stateless Constituent Entities.

Investment Entities

Article 26 of the Draft Law includes investment entities within the scope of the DMTT and provides provisions analogous to Article 7.4 of the OECD Model Rules.

Accounting Standard

Article 5(3) of the Draft Law provides that if a constituent entity is not obliged to apply international financial reporting standards in Montenegro, the calculation of excess profit, may be carried out on the basis of an acceptable or approved financial accounting standard, (corrected for any significant distortion of market competition).

International Activity Exemption

The UTPR exclusion for MNEs in their initial phase of international activity does not need to be included in a QDMTT, however, it can be included. The Second Set of OECD Administrative Guidance provides jurisdictions with three options regarding the temporary UTPR exclusion in their QDMTT legislation.

Option one allows the jurisdiction not to adopt it.

Option two allows the jurisdiction to adopt it but limits it to cases where no Parent Entity is required to apply a Qualified Income Inclusion Rule with respect to Constituent Entities of an MNE Group located in the QDMTT jurisdiction.

Option three allows the jurisdiction to adopt it without any limitations. (Note, if a jurisdiction opts for Option three, for the purposes of the QDMTT Safe Harbour the Switch-Over Rule would apply).

Montenegro applies Option One.

Other Deviations

No other deviations from the OECD Model Rules (as permitted in the OECD Administrative Guidance) are currently included in the Draft Law

Filing

The relevant aspects of the submission of a tax information return are included in Article 28 of the Draft Law, as provided in the OECD Model Rules.

The proposed approach is that every Constituent Entity located in Montenegro will have an obligation to file a tax information return in Montenegro. However, this obligation can be discharged if the tax information return is filed by:

-The Ultimate Parent Entity, or

-The Designated Filing Entity

where there is a qualifying tax information exchange agreement in place.

Where the tax information return is being filed by either the Ultimate Parent Entity or the Designated Filing Entity, the Constituent Entity, must file a notification with the Tax Authority.

The notification must contain:

-Details of the entity that is filing the tax information return, and

-The jurisdiction in which such an entity is located.

Where the tax information return is filed by the Designated Local Entity it needs to outline the Constituent Entities that it is filing on behalf of.

The tax information return must be filed no later than 18 months after the end of the fiscal year.

Article 28(7) of the Draft Law provides that if two or more constituent entities of the same group of international enterprises or large domestic groups are located in Montenegro, they are required to appoint one entity to be considered the responsible entity for all administrative rights and obligations.

Article 30 of the Draft Law provides that a constituent entity that is liable for DMTT in Montenegro is obliged to electronically submit a DMTT return to the tax authority no later than 18 months after the end of the last day of the fiscal year.